Walt Higgins told shareholders at the annual meeting in the Reno Hilton that, as electric power became scarce and prices skyrocketed in 2001, the utility kept its end of the deal: borrowing money and signing contracts to keep the electric power and gas flowing.

“We did so in the expectation we would recover substantially all of those funds through a deferred energy law passed by the Nevada Legislature in April 2001,” he said.

But he said The Public Utilities Commission ruled a total of $437 million in Nevada Power Co. costs and $56 million in Sierra Pacific Power costs “not prudently incurred.”

Higgins said he and his staff were shocked and that the reaction within the industry as well as among industry experts was similar. He said the effect was dramatic. In the financial slump that followed, company stock dropped from more than $15 a share to less than $7, the company’s credit rating was downgraded to “junk” and shareholder dividends for the year had to be canceled.

“Nearly every penny of that loss is directly related to disallowed power costs,” he said.

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In response to questions from shareholders, he said utility administrators have suffered along with shareholders. They haven’t received the incentive payments or long term incentives that make up much of their compensation for two years now, haven’t gotten raises and, since nearly all of them are also stockholders, have suffered the same equity losses as every other investor in the room.

But he told them the utility is battling back. He said Sierra Pacific Resources is asking the Federal Energy Regulatory Commission to rule the contracts signed with 10 different power suppliers including Enron “unjust and unreasonable.” Canceling those contracts would greatly help Sierra Pacific’s bottom line.

In addition, they are in state court challenging the decision to cut a half-billion dollars off the cost recovery they say was promised by the 2001 Legislature. He said regulators who ruled the power purchases imprudent and bad business are looking at the situation with the 20-20 vision only possible through hindsight and that Sierra Pacific still believes its actions and purchases were the best business decisions they were able to make at the time.

And he said they are battling Enron, which claims Sierra Pacific owes it some $300 million over a canceled contract.

“We think Enron is guilty of being the perpetrators of this crisis,” he said.

“We intend to right them and never pay them a nickel.”

In the long run, Higgins said the utility is moving to restore confidence in its operations and profitability. But he said that won’t happen over night.